In February, a bullish forecast from the National Association of Home Builders (NAHB) projected single-family production to increase 32% to 822,000 units this year (see post here). The April U.S. housing starts and permit data released today represents a pace of 649,000 units (a 5% increase over the 618,000 units built last year).

Much of today’s analysis points to significant variables beyond seasonal weather that are defining the reality of new home construction:

• “What’s been notable since the housing crash is how much construction is aimed at meeting demand for rental housing,” said Ryan Wang, an economist at HSBC Securities USA Inc. in New York. “There’s been a trend away from homeownership that’s persisted even as the pace of foreclosures has slowed. What we can see is that higher home prices, particularly for new homes, have weighed on demand.” Source
• “Starts for the volatile multi-family homes segment surged 39.6 percent in April. Permits for single-family homes, however, rose just 0.3 percent and continue to lag groundbreaking, suggesting single-family starts could decline in the months ahead.. questions remain over how lasting the current strength will prove, and the report on consumer confidence offered a cautionary note.” Source
• “For anyone tempted by these shiny headline numbers to conclude all the recent worry about the state of the housing market was much ado about nothing, we suggest you curb your enthusiasm, at least for now,” wrote Richard Moody, chief economist at Regions Financial Corp, in a note to clients. The report, he wrote, “shows more of the same – a vibrant multifamily segment with a single-family segment still awaiting takeoff.” Source
• “Single-family is still concerning, but multi-family is going full throttle,” said Moody, who had forecast 1 million housing starts. “We’re seeing job growth pick up, income growth pick up, and now there’s talk of loosening up credit for home purchases,” and those “should contribute to a pick-up in single family activity.” Source
• “The current stock of apartments is insufficient to satisfy demand, sending rents soaring across the country and making multi-family units an attractive investment for developers and landlords,” said Stephanie Karol, an economist at IHS Global Insight in Lexington, Massachusetts. Source
•  “The rental market continues to be strong due to the foreclosure crisis and the lack of economic mobility.. the housing recovery is happening, however meekly.” Source